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Is Uber of the Energy Market Around the Corner? - Two Key Energy Industry Trends for 2020 and Beyond

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This item is part of the Predictions & Trends - Special Issue - 01/2020, click here for more

2019 was the year that “Climate emergency” rose to the top of public consciousness. Oxford Dictionaries named it their ‘word of the year’ following a hundred-fold increase in its usage over 2019. There’s a growing understanding both from the utility industry and from wider society, of the urgent need to accelerate the energy transition. 

Consumers’ growing demands for sustainability are a major driver of the two biggest trends in the energy sector in 2020. These are, firstly, the increasing importance of the Grid Edge and secondly, the emergence of a new business model for utilities as a response to this; the rise of the Platformed utility.   

1. Ground-Breaking Innovation at the Grid-Edge  

Grid-Edge innovation will flourish with new players entering the energy market. They will bring ground-breaking service offerings delivered in a disruptive way. Could we even see the arrival of an Uber of the energy sector?   

A shift to Decentralization brings Unpredictability 

The movement away from a centralized energy system and towards a more distributed, decentralized approach is only going to gather pace. Utilities are responding to calls to cut carbon emissions and are moving towards distributed energy resources. In the U.S., clean energy investments hit record levels in 2019, increasing by 28% in 2019. Globally, the IEA predicts that renewable power capacity is set to expand by 50% between 2019 and 2024. 

The rise of DERs, microgrids, storage solutions, electric vehicles (EVs) and their charging infrastructure, together with consumer energy technologies are all part of this shift. They are also acting as a driver of further innovation at the Grid Edge. One of the common factors of many of these developments is their unpredictability.  

Take EVs as an example. Unpredictable charging behavior has the potential to put the grid, particularly the low-voltage grid under severe strain. Over 90% of EV charging is done at home or work. Even a low number of plug-in electric vehicles charging in an uncoordinated clustering effect will significantly increase the peak demand seen by distribution transformers and might require upgrades to the electricity distribution infrastructure.  

Data is a key ingredient for Grid-Edge Innovation  

New energy consumption patterns through EV charging and the intermittent nature of renewables makes it harder for utilities to manage the grid. There is one essential component that makes this task possible; data. Utilities must be able to access data through effective integration. 

Improved access to data will not only help utilities balance the grid. It will bring them closer to their customers and enable them to introduce more customer focused services or personalized tariffs.   

Real-Time and the Grid Edge 

As Grid Edge innovation increases, we will see more sensors and smart technologies gathering an abundance of real-time data, data that has the potential to bring efficiencies and improved customer services to utilities. The challenge is to bring real-time visibility to this data so that its value can be realized. 

Critical to real-time data is integration. Not only does IT have to be integrated across the value chain, operational technology must be integrated with IT. Creating real time data flows is the first step to creating a truly smart grid.  

Is the Uber of the energy market around the corner? 

With such a flurry of activity at the Grid Edge, it’s unsurprising that this area is seeing a rise of new market entrants. Many of these new arrivals are startups with highly specialized skillsets. Others are large companies, well established in other sectors. The increased adoption of EVs has brought in car manufacturers such as Nissan and Volkswagen with their own energy offerings. In some markets, such as the U.K., Nissan offers a ‘home energy solution’ which includes solar panels, a battery (either new or recycled from one previously used in a Nissan Leaf) and an energy management system. 

Large tech companies are also edging into the market. Amazon and Facebook are among the businesses that are driving demands for renewable energy. Google is expanding its behind the meter presence through its Nest system and a growing network of energy sector partnerships. These could be ground-breaking collaborations. A trusted tech giant brand name combined with the innovative ideas and specialized technologies of startups is a powerful combination with the potential to disrupt the energy retail market.  

Are we going to see a new market entrant becoming the platform between consumers and their energy provision? Some commentators have suggested that the two vital components of this model are data and a trusted, consumer-oriented interface. Utility companies are already strong in the data component of this model, but they are too often seen as lacking in customer-focus. 

With increasing involvement at the Grid Edge and with better knowledge of their customers through data, utilities have the potential to provide both parts of the equation. Perhaps we’ll see utilities disrupting their own business models to provide the services the next generation of energy consumers want.   

2. The Platformed Utility 

2020 will see some utilities taking their first steps away from being a simple ‘wired utility’ towards the new data-driven, platformed utility.  

Utilities are data-rich organizations. By using a platform approach, utilities can put their data to work, gather insights and innovate rapidly. 

What are the first steps we’ll see utilities taking in becoming platformed utilities in 2020? The ability to integrate and access their own data is key, for example connecting to enterprise applications and applying new technologies such as artificial intelligence, or even integrating operational technology with IT.  

Utilities will also start to intensify their activities to modernize their IT infrastructure, leveraging containerized, cloud-based technologies. This will enable them to manage and utilize the vast quantities of data they can potentially access in a smart way. 

Ultimately, the platformed utility will integrate data from Grid Edge innovations; Smart Meters and EV charging stations, DERs and microgrids. It will enable customers to monitor their electricity consumption on apps or sell their home-produced energy back to the grid. The platformed utility will become a rich information resource at the center of an energy ecosystem. 

Utilities will be able to offer customers both the tailored energy packages they want and the easy access to services they expect, the platformed utility can be the one-stop-shop of the energy sector. 

Thorsten Heller's picture

Thank Thorsten for the Post!

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Discussions

Matt Chester's picture
Matt Chester on Jan 30, 2020 10:50 pm GMT

As Grid Edge innovation increases, we will see more sensors and smart technologies gathering an abundance of real-time data, data that has the potential to bring efficiencies and improved customer services to utilities. The challenge is to bring real-time visibility to this data so that its value can be realized.

Love that you bring this up-- we have so much data collection opportunities now, but the possibility of that energy data is barely being tapped: https://aceee.org/blog/2020/01/smart-meters-gain-popularity-most

How do you think we make sure utilities are suitably utilizing the data once it is available?

Thorsten Heller's picture
Thorsten Heller on Feb 19, 2020 9:30 am GMT

I think there are 2 important things for utilities to be able to utilize the vast amount of valuable data:

1. Utilities have to heavily invest in a modern IT infrastructure which is suitable to handle big data. That means, utilities have to rethink their entire IT strategy and start leveraging cloud based technologies, ML / AI, microservices based architecure or distributed systems. I don't believe that utilities will be able to utilize data in a smart and effective way if they continue to implement / operate these monolitic enterprise applications from the big vendors. 

As example, I would recommand utilities to think about the Energy Service Mesh concept as their IT foundation for a data-driven future: 

2. Utilities have to build a Digital DNA and a Startup Mindset. That means, utilities should consider agile project delivery models and come in this kind of "fail fast, fail often"-mode of prototyping, validating and improving new digital data driven services. I don't believe that utilities will be able to utilize data if they run their traditional waterfall project model and their tradional legacy mindset. 

Here is a link to a podcast where the German utility ENBW / Netze-BW talks about their experience with the Agile Utility

Matt Chester's picture
Matt Chester on Feb 19, 2020 12:52 pm GMT

Couldn't agree more with what you're saying, Thorsten. Just because a utility has been around and getting the job done for decades doesn't mean there's not a lot of innovation and improvement available. They may think 'if it ain't broke, don't fix it,' but within a few years those who fail to truly take advantage (with that startup mindset you mention) will look around at their peers and realize how far behind they are. And customers will surely take notice

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